Nascent Competitors

35 Pages Posted: 19 Jun 2020 Last revised: 12 Oct 2020

See all articles by C. Scott Hemphill

C. Scott Hemphill

New York University School of Law

Tim Wu

Columbia University - Law School

Date Written: June 11, 2020


A nascent competitor is a firm whose prospective innovation represents a serious future threat to an incumbent. An incumbent’s acquisition or exclusion of such firms presents a challenge for antitrust law, because while nascent competitors often pose a uniquely potent threat to an entrenched incumbent, the firm’s eventual significance is uncertain, given the environment of rapid technological change in which such threats tend to arise. As we explain, nascent competition merits protection even where successful competitive entry is highly uncertain. In evaluating the incumbent’s conduct, evidence of intent, as revealed through testimony, documents, or conduct that would be unprofitable absent the elimination of a rival, takes on heightened importance.

Protecting nascent competition from anticompetitive acquisitions sometimes requires after-the-fact scrutiny of the transaction. There are costs to waiting but also benefits, including the revelation of critical information that was previously unavailable. Acquisitions by a dominant firm can be examined under ordinary merger law or instead as unlawful maintenance of monopoly, an approach that has several advantages. Ultimately, blocking anticompetitive acquisitions of nascent competitors is far from a general ban on deals between startups and incumbents. To the contrary, our suggested approach would discourage, at most, acquisition by the firm most threatened by a nascent rival.

Keywords: Antitrust, Facebook, Microsoft, Nascent Competition, Platforms, Potential Competition

JEL Classification: K21, L40, L41, D42

Suggested Citation

Hemphill, C. Scott and Wu, Tim, Nascent Competitors (June 11, 2020). University of Pennsylvania Law Review, Forthcoming, Available at SSRN: or

C. Scott Hemphill (Contact Author)

New York University School of Law ( email )

40 Washington Square South
New York, NY 10012-1099
United States

Tim Wu

Columbia University - Law School ( email )

435 West 116th Street
New York, NY 10025
United States

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